Super-rich avoiding £13TRILLION in tax as campaigners warn of 'defining moment for democracy'

A global elite of the super-rich are hiding up to £13trillion ($20trillion) from governments around the world, according to an explosive new report.

The mind-blowing estimate is more than the combined gross domestic product of the US and Japan and is a threat to the very essence of democracy, said campaigners.

It comes as officials in the UK announce new plans to force the operators of tax avoidance schemes to hand over the names of clients so that more legal challenges can be brought to combat aggressive tax avoidance.

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The Cayman Islands ranked highly in a list of nations where a large quantity of the huge sums are heading annually

The estimate of how much is being squirreled away by rich tax avoiders was included in a report, The Price of Offshore Revisited.

Its author, James Henry, a former chief economist at consultancy McKinsey, used data from the World Bank, International Monetary Fund, United Nations and central banks.

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His report gave a total of at least £13trillion, but said assets he had not been able to identify could make it as high as £20trillion. Mr Henry said the assets of ‘high-net-worth individuals’ are being protected by ‘professional enablers’ taking advantage of gaps in cross-border tax rules.

According to his calculations, £6.3trillion of assets are owned by 92,000 people – or 0.001 per cent of the world’s population.

NET CLOSING IN ON UK'S TAX DODGERS

The Treasury will publish proposals to ensure the taxman knows exactly which celebrities, sports stars and millionaires benefit from tax-avoidance schemes, following the furore over comedian Jimmy Carr’s tax affairs.

In a speech today at the Policy Exchange think tank, Treasury Minister David Gauke will lay out plans for the tougher regime, in which promoters of tax-avoidance schemes will be forced to provide HMRC with more information about their customers so that it can more easily identify the users.

Crucially, the Treasury plans to target those who run the schemes. Individuals managing or promoting tax-avoidance schemes are also subject to the rules, as well as their firms.

This will allow investigators to hold them to account even where a firm is dissolved, moved offshore, or an individual promoter moves to a different firm.

Treasury officials insisted the Chancellor will not name and shame the rich and famous and that personal tax confidentiality will be preserved.

But a senior Government source said the plans would make it ‘more likely’ that court cases could be brought against those who use tax-avoidance schemes, and that could lead to names becoming public in some cases in future.

John Christensen, of the international campaign group Tax Justice Network, which commissioned the research, said: ‘What the [£13trillion] figure doesn’t include is the non-financial assets, the yachts, the jets, the works of art, the real estate.’

Mr Christensen added: ‘I would say this is a defining moment for democracy, because unless people feel governments are treating taxpayers fairly our faith in democracy disappears. I know that people feel angry.’

A previous Financial Secrecy Index compiled by the Tax Justice Network ranks the jurisdictions enjoying an influx of capital in a Financial Secrecy Index.

In the table for 2011, it suggests that Switzerland, the Cayman Islands, Luxembourg and Hong Kong are amongst the nations where a large amount of the huge sums are heading.

And despite the popular perception of tax havens as being small isolated islands, the campaign group says that the biggest players in 'the supply of financial secrecy' are almost all wealthy nations.

The group also estimates that around $250billion is lost in taxes each year by governments worldwide as a result of the wealthiest individuals holding their assets offshore.

The total value of the money being leaked from some nations even dwarfs the debts they often owe to the rest of the world.

According to the Tax Justice Network, the consequences of this tax avoidance are severe.

'Secrecy distorts trade and investment flows, and creates a criminogenic environment for a litany of evils that hurt the citizens of rich and poor countries alike.

'It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.'

Estimates suggest that if the interest on the huge sums being lost were taxed at a rate of around 30 per cent, around £121bn would be generated for the treasuries around the world.